Key 21 amendments proposed in GST Law

Contributed by CA Bimal Jain

Key 21 amendments proposed in GST Law

A year-old Goods and Services Tax (“GST”) is all set to see slew of amendments soon. To iron out the practical hindrances and issues being faced by the Industry Inc since the implementation of GST, the GST Council (apex decision making body for GST) on July 9, 2018 had unveiled the draft of proposed changes in GST law before they are introduced in the upcoming monsoon session of the Parliament. Total 46 amendments are suggested as a major step towards facilitating trade and ease of doing business.
Importantly, blockage of credits will be minimized as now it is proposed to allow ITC in respect of food and beverages, health services and travel benefits to employees, which are obligatory for an employer to provide to its employees under law along with allowing ITC for dumpers, work-trucks, fork-lift trucks and other special purpose vehicles used in business. Noticeable, no credit shall be available in respect of general insurance, servicing, repair and maintenance in respect of motor vehicles, vessels and aircraft on which ITC is not available. Further to ease out worries due to non-revision of returns, it is suggested to enable the taxpayers to correct inadvertent mistakes by filing an amendment return.
Another significant amendments includes classification of merchant sales, high seas Sale transactions etc. under Schedule III to settle reversal of credit issues, restricting reverse charge implications under Section 9(4) to specified class of registered persons, allowing debit/credit notes to be issued against multiple invoices at a time etc. The amendments also seek to give effect to some of the decisions taken by the GST Council in the past like raising the turnover threshold for availing composition scheme increased from Rs 1 crore to Rs 1.5 crore.
The public is invited to give their valuable suggestions on these proposed amendments till July 15. Inviting suggestions is indeed a remarkable step towards identifying essence of taxpayers in partnering nation growth and development. List of amendments proposed show receptiveness of the GST Council towards concerns of the taxpayers which time and again has been represented vide various mechanisms of writs, Industry representations etc. With these changes coming in, a large number of writs may have to be withdrawn subsequently.

Key amendments proposed in GST law:

1. DefinitionsA. Services: Although ‘securities’ [s. 2(h) of Securities Contract Regulations Act, 1956] are excluded from the definition of ‘goods’ and ‘services’ in the CGST Act, 2017, but it is proposed to include an explanation in the definition of “services” under Section 2(102) of the CGST Act, 2017 to clarify that if some service charges or service fees or documentation fees or broking charges or such like fees or charges are charged in relation to transactions in securities, the same would be a consideration for provision of service and chargeable to GST and will include facilitating or arranging transactions in securities.B. Supply: The term ‘supply’ is proposed to be amended to exclude activities/ transactions listed in Schedule II to ensure that the activities/ transactions as per Schedule II is to decide only whether the same is supply of goods or services. Hence, activities/ transactions listed in Schedule II (as supply of service or supply of goods) shall be taxed only when they constitute ‘supply’ in accordance with provisions of Section 7(1)(a), (b) and (c) of the CGST Act.

2. Schedule I: Import of services by entities which are not registered under GST (say, they are only making exempted supplies) but are otherwise engaged in business activities shall be chargeable to tax when such services received from a related person or from any of their establishments outside India.

3. Schedule III: The scope of Schedule III is proposed to be expanded to include following transactions:A. Merchant trading i.e. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into the taxable territory.

B. Supply of goods in the course of High Seas Sale and Sale of warehoused goods: To ensure no double taxation on such transactions before clearance for home consumption as clarified by recent Circulars stating that IGST would be payable only once at the time of clearance of goods for home consumption, now, these transactions are proposed to be included as ‘neither a supply of goods nor supply of services’ in Schedule III, which is a major relief to the taxpayers.

Note: It is also proposed that the same shall not be regarded as exempt supply for the purposes of input tax credit reversal.

4. Reverse Charge U/S 9(4) of the CGST Act: GST Council has proposed to omit existing Section 9(4) of the CGST Act and instead, grant an enabling power for the Govt. to notify a class of registered persons who would be liable to pay tax on reverse charge basis in case of receipt of taxable goods or services from an unregistered supplier. The details of such specified persons are to be notified in future.

5. Composition suppliers: The council has proposed to give effect to its earlier decision to increase threshold limit for the composite suppliers from INR 1 crore to 1.5 crores and further to enable registered manufacturers and traders to opt for composition scheme u/s 10(1) of the CGST Act even if they supply services of value not exceeding 10% of the turnover in the preceding FY in a State/Union territory or Rs. 5 lakhs, whichever is higher [Presently, registered persons engaged in the supply of services (other than restaurant services) are not eligible for the composition scheme].

6. Time of Supply of goods and services under forward charge u/s 12(2) & 13(2) of the CGST Act: The amendment seeks to correct a drafting error in the earlier law, as the issuance of invoice/other documents are also to be included as specified in other sub-sections of Section 31 of the CGST Act.

7. Input Tax Credit:
A. Enables GST ITC available to recipient on deeming fiction when goods or services supplied by supplier on direction of registered person to any other person as on agent or otherwise.

B. Proposed to delete interest applicability when GST ITC is reversed for non-payment of invoice amount after 6 months from date of invoice.

C. ITC availability in case of motor vehicles having approved capacity of not more than 13 persons (including the driver) only in case it is used for specified purposes. The amendment is sought to make it clear that input tax credit would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles. Further, an amendment is also being made to the effect that ITC will not be denied in respect of motor vehicles if they are used for transportation of money for or by a banking company or a financial institution.

D. The proposal is to clarify that GST ITC is not available in respect of services of general insurance, servicing, repair and maintenance in respect of those motor vehicles, vessels and aircraft on which ITC is not available.

E. Presently, in accordance with the provisions of Section 17(5)(b), ITC is not available in respect of food and beverages, health services, travel benefits to employees etc. Now, it is proposed that ITC in respect of food and beverages, health services, renting or hiring of motor vehicles, vessels and aircraft, travel benefits to employees etc., can be availed where the provision of such goods or services is obligatory for an employer to provide to its employees under any law for time being in force.

8. Value of Exempt Supply for reversal of ITC: It is proposed that no reversal of common ITC shall be required on activities or transactions specified in Schedule III (other than sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building) by excluding it from the ambit of ‘exempt supply’ for the purpose of reversal.

9. Computation of turnover for distribution of credit by ISD: It is proposed to exclude the amount of tax levied under entry 92A of List I and duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule from the value of turnover for the purposes of distribution of credit.

10. Registration:
A. The proposed amendment in Section 25(2) of the CGST Act allows multiple places of business of the taxpayers in addition to the different business verticals within the state to be registered separately. This provides a major relief to certain industries like transporters, PSU etc. by increasing the ease of doing business.

B. It is proposed that State of Assam be removed from special category States along with J&K in explanation (iii) to Section 22 of the CGST Act and, thereby, increase the threshold limit for registration from 10 lakhs to 20 lakhs in their State.

C. Clause (x) of Section 24 is being amended to provide that only those e-commerce operators who are required to collect tax at source under Section 52 of the CGST Act would be required to take compulsory registration. Other e-commerce operators who are not required to collect tax at source under Section 52 would henceforth not be required to take registration if their aggregate turnover in a financial year did not exceed Rs. 20 lakhs.

D. It is also proposed to insert the provisions of separate registration for a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer as a business vertical distinct from his other units located outside the Special Economic Zone in the same State or Union territory. This provision is already contained in rule 8 of the CGST Rules.

11. Suspends registration temporarily when cancellation of registration sought by taxpayers or proper Officers: The council has proposed to insert a new proviso to Section 29(1) & (2) of the CGST Act, so that once a person applies for cancellation of the GST registration or proper officer initiate cancellation of registration, the proper officer shall suspend the registration temporarily till all the formalities are completed so that the person does not have to pay the tax after the period of cancellation.

12. Issuance of Credit and Debit Note in respect of multiple invoices: The amendment seeks to permit a registered person to issue consolidated credit / debit notes as prescribed under Section 34 of the CGST Act in respect of multiple invoices issued in a Financial Year without linking the same to individual invoices.

13. Amendment/ Revision of Returns: It is proposed to allow taxpayers to amend the returns. This provision existed in pre-GST regime, and is a trade friendly measure which would enable the taxpayers to correct inadvertent mistakes in the returns by filing an amendment return by the due date for furnishing of return for the month of September or second quarter following the end of the financial year, or the actual date of furnishing of relevant annual return, whichever is earlier.

14. Simplification of Returns: A new provision is being introduced by inserting section 43A, to enable the new return filing procedure as proposed by the Returns Committee and approved by the GST Council. However, the detailed mechanism of giving effect to the above proposal is awaited.

15. GST Practitioners: It is proposed to allow the GST practitioner to perform other functions such as filing refund claim, filing application for cancellation of registration etc., in addition to presently, they are authorized to furnish the details of outward and inward supplies and various returns under Sections 39, 44 or 45 on behalf of a registered person.

16. Payment of Tax: To allow fund settlement on account of IGST, it has been proposed that a registered person would be able to utilize credit on account of CGST, SGST/UTGST once the registered person has exhausted all the ITC on account of IGST. It has been further proposed to insert an enabling provision 5A in Section 49 of the CGST Act that allows the Government, on the recommendation of the GST council, to provide a specific order in which a registered person can utilize Input tax credit viz. integrated tax, central tax, State tax or Union territory for the settlement of the tax liability.

17. GST Refunds: Amendments are proposed under Section 54(3) of the CGST Act to file refund claim for the unutilized ITC on Inputs & Input Services by due date for furnishing of returns under section 39 for the period for which the claim for refund of ITC arises, which is presently the end of the financial year.
Further, Section 54(8)(a) of the CGST Act is proposed to be amended to allow unjust enrichment in case of refund claim arising out of supplies of goods or services made to SEZ developer/unit.
Furthermore, vide Explanation (2)(c)(i) under Section 54 of the CGST Act, It is proposed to allow receipt of payment in Indian rupees in case of export of services where permitted by the Reserve Bank of India since particularly in the case of exports to Nepal and Bhutan, the payment is received in Indian rupees as per RBI regulations.
In this respect, the provisions of Section 2(6)(iv) of the IGST Act are also being amended to provide that services shall qualify as exports even if the payment for the services supplied is received in Indian rupees as per RBI regulations.

18. Recovery of Taxes: It has been proposed by the Council to broaden the scope of persons to include “distinct persons” as provided under Section 25(4) and 25(5) of the CGST Act so that at the time of recovery of tax the authorities can collect the tax from the other entities of the registered person operating in other parts of India.
Further, it is proposed to clarify the definition of ‘collector’ to include Collector of a Revenue district, Deputy Commissioner, Deputy Magistrate or head of the Revenue administration in a revenue district.

19. Pre-deposits for filing an appeal to Appellate Authority and Appellate Tribunal: It is proposed under Section 107(6) of the CGST Act to put a ceiling on the limit of the amount to be deposited before filing an appeal to the appellate authorities which is 10% of the disputed tax amount subject to maximum limit of Rs.25 crores.

Further, it is also proposed under Section 112(8) of the CGST Act, the maximum amount to be deposited to file appeal from the appellate authority to appellate tribunal is 20% of the disputed tax amount along with the amount deposited u/s 107(6) subject to maximum of Rs. 50 crores

20. Transitional Provisions – No credit of EC/ SHEC/ KKC, etc: It is proposed to clarify that only transitional credit of eligible duties can be carried forward in the return and not all credits. This provision is already contained in Rule 117(1) of the CGST Rules. The eligible duties do not include the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.

21. Extension in time period for return of Inputs/ CG from Job Worker: It is proposed to insert a proviso in Section 143 to provide that the period of one year or three years for Inputs/ CG may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.

22. Other Miscellaneous changes:
A. Proposed changes in the IGST Act, 2017
1. It has been proposed to allow acceptance of receipts in Indian currency for export of services, wherever it is permitted by RBI u/s. 2 (6) (iv).

2. It has been proposed to add ‘Panchayat under Article 243G’ in the Explanation to 2(16).

3. It has been proposed u/s 12 (8) that the transporters located in India transporting goods outside the Indian territory would not be liable to pay IGST as a place of supply is outside India and would amount to an export.

4. It is proposed under Proviso to Section 13(3)(a) that no tax liability shall be imposed on the job work that is done on the goods imported and then reexported.

B. Proposed changes in the GST (Compensation to States) Act, 2017
1. It is proposed u/s 10 (3A) that the fund remaining unutilized in the fund may distributed among the center and the states on an adhoc basis on the recommendation of the council.

Note:Views presented in this article are personal view of the author. Information presented in this article is intended for information purpose only and does not constitute any legal opinion or advice. Readers and Users are requested to seek formal legal advice prior to acting upon any of the information provided herein.